After the Arab Spring

Countries in the Middle East and North Africa provide foreign businesses with strong opportunities for growth, says Marvin Zonis, Professor Emeritus, Chicago Booth School of Business.

The major issue of our time is uncertainty. With this uncertainty comes anxiety and, because of this anxiety, there has been a reluctance to pursue business opportunities in the Arab Middle East. The amount of foreign direct investment in the region has been plummeting. For example, in Egypt in 2010 there was $7 billion of such investment, which has now fallen to less than $1billion. In Libya it has fallen to zero from $5 billion.

Yet, the Middle East remains, of all the regions in the globe, potentially the most desirable for foreign businesses. This is partly because the dictatorships, which characterised the region for so long, were extractive, benefitting only a small clique of business people. Now, whole economies are opening up, ripe for transformation.

Egypt is a key example. This is a country full of highly-educated people which is still, economically speaking, very primitive. If the country can work towards stability, then it represents a magnificent opportunity, which foreign investment could enter and strengthen and profit from.

The key need in Egypt in particular, which foreign investors would have to work very carefully with any government to deal with, is agriculture. In order to kick-start the economy, money needs to get into the rural areas. To do this, the productivity of Egyptian farmers needs to be increased. Also, the textile industry is fundamental to the Egyptian economy. But there are opportunities for growth in several industries in the region, one being perhaps bizarrely alcoholic beverages – Egyptian Al Ahram Beverages Company made huge profits before selling to Heineken. One of the industries which has seen the most success is food processing – there are many established companies at different stages in the food processing chain.

I believe an interesting bet for businesses is Palestine, as Israel attempts to substitute independence for the Palestinians with economic growth. The Palestinians are, again, exceptionally well-educated, and there is stability in the West Bank region, with money coming in, even from Israel itself.

There are ways in which multinationals are best attuned to expansion in the Arab Middle East, having the expertise required around marketing, investing, producing and managing political risk. Firms seeking to move into the Middle East should be working now to investigate and prepare for the possibility of partnering businesses in the region. When stability is achieved, this preparatory work will already be complete, facilitating market entry.

There is no question that this part of the world is going to be a great success.


For more information on Marvin Zonis visit: www.marvinzonis.com

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